The blog of the Alliance for American Manufacturing

Donald Trump Rolled Over on Chinese Currency Manipulation

Have you listened to the Manufacturing Report, the Alliance for American Manufacturing’s podcast? You should, man, it’s pretty good. On it you’ll hear from academics, politicians, and activists involved in manufacturing politics and policies coming out of Washington, DC – and it’s always quick, no more than 15 minutes of your time. This week, AAM President Scott Paul speaks with Oodie Royal, a United Steelworkers local president from Lone Star, Texas, about the reaction of workers there to President Trump’s early trade policies.

So far, that reaction is mixed. Since his inauguration the president has announced a series of executive orders designed to shore up trade – an issue which Trump described in dire terms during his campaign. But as the months have rolled on, the president has walked back from some of those positions.

Case in point: The president was apoplectic about Chinese currency manipulation during the campaign, and now he's not.

This is just one of many policy U-turns the president has recently taken, and on the whole he has been praised for establishing more “moderate” positions. The shift on Chinese currency manipulation, as such, has generated lots of self-satisfied returns from economic pundits, who

1) observe the China hasn’t held down the value of its currency for a few years,

and 2) suggest this reality catches up with candidates once they assume the office. (Barack Obama spoke negatively about Chinese currency practices as a candidate, but ignored the issue as president; his challenger 2012, Mitt Romney, called it a “day one” issue, but almost assuredly would have done nothing had he won.)

Basically, their point is: Complaints about China’s currency are out of date, and therefore it would have been dumb to call China a currency manipulator, and Trump is bowing to reality.

But almost none of those pundits lost a job or wages to Chinese import competition. And Donald Trump wasn’t elected to be a run-of-the-mill political leader, but rather a change agent.

Look, most voters don’t know what currency manipulation means. But they do know the Chinese government ran a mercantilist, export-driven growth model at the expense of the United States for more than a decade. And an artificially cheap Chinese currency underpinned the flood of Chinese imports that contributed to depressed American wages millions of lost American jobs.

Labeling China a currency manipulator might have been technically inappropriate in April 2017, but removing the threat of that label hampers the Trump White House’s ability to affect real change in the bilateral trading relationship. As this columnist points out, ignoring bad Chinese trade practices have lead us into our current situation:

There were reasonable arguments against putting China on the spot and starting a process that could eventually lead to American retaliation.

Yet by not pushing back against China’s currency manipulation, and allowing China to deploy an arsenal of trade tactics of dubious legality to increase exports to the United States, successive administrations — Republican and Democratic — arguably contributed to the economic dislocations that pummeled so many American workers over more than a decade. Those dislocations helped propel Mr. Trump to power.

The president campaigned on a promise to help the communities affected by the shock of Chinese trade. He’s got a lot of executive orders out there that call for reviews of trade deficits, and after face-to-face meetings with Chinese President Xi Jinping says his administration and the Chinese government have more to talk about ... but it simultaneously appears he’s instead using the threat of trade enforcement to compel China to shut off its economic relationship with North Korea.

Maybe that'll work to a point, but it almost certainly won’t stop North Korea from trying to build a nuclear weapon, and it’ll leave Trump-supporting American workers wondering what they voted for. As Scott Paul put it:

(President Trump) gave up a significant point of leverage and broke a campaign promise. He campaigned on the premise that he was going to look out for the forgotten man and woman and that their interests wouldn’t be sacrificed at the altar of international diplomacy. But that appears to be exactly what is happening here.